Investment Company Act of 1940—Section 12(d)(3)
ASA Limited

July 23, 2010

RESPONSE OF THE OFFICE OF CHIEF COUNSELDIVISION OF INVESTMENT MANAGEMENT

Our Ref. No. 200910201836File No. 811-21650

Your letter dated July 23, 2010 requests our assurance that we would not recommend enforcement action to the Securities and Exchange Commission (“Commission”) under section 12(d)(3) of the Investment Company Act of 1940 (the “Company Act”) againstASA Limited (“ASA”) if, under the circumstances described below, ASA organizes and acquires the securities issued by a wholly owned subsidiary (“Adviser Sub”) that may provide investment advisory services to registered investment companies, U.S. and non-U.S. unregistered investment companies, institutional investors, separate account clients and others (“Clients”).1

BACKGROUND

You state the following: ASA is an internally managed, closed-end management investment company registered under the Company Act pursuant to an exemptive order under section 7(d) of that Act (as amended, the “Section 7(d) Order”).2 ASA invests primarily in the stocks of companies engaged in the exploration, mining, or processing of gold, silver, platinum, diamonds or other precious minerals. It also may invest in gold, silver, and platinum bullion or securities that seek to replicate the price movement of gold, silver, or platinum bullion. Since 1978, ASA has been internally managed by its directors, officers, and employees.3

ASA’s board of directors (“Board”) and officers desire to expand the scope of their advisory activities beyond the management of ASA to, among other things,allow them to offer investors additional investment options in the precious minerals and natural resources sectors. ASA’s Board and officers have determined that providing advisory services through an investment adviser entity that is wholly owned by ASA would be the most beneficial to ASA’s shareholders. ASA’s Board and officers believe that this is the best option for ASA’s shareholders because it would allow ASA to use its current resources (i.e., its investment professionals) to increase ASA’s gross revenue and income, while at the same time allow an expansion of advisory personnel and advisory activities. It also would allow ASA to shield itself from potential conflicts and liabilities associated with such advisory activities that ASA would be exposed to if it directly engaged in such activities.4 ASA sought and received, on March 11, 2010, shareholder approval of its proposal to enter into the business of providing advisory services to Clients either directly or through Adviser Sub.

ASA will capitalizeAdviser Sub with an amount of money and assets reasonably necessary to cover Adviser Sub’s organizational expenses. Adviser Sub also will utilize certain employees and facilities of ASA to meet the investment advisory requirements of Clients. It is expected that, initially, allof ASA’s officers and employees will hold similar positions as officers and employees of Adviser Sub.

You represent that the regulatory protections of ASA’s shareholders would in no way be compromised by ASA’s ownership of Adviser Sub. ASA would continue to be subject to the Company Act and to oversight by the Commission as a registered investment company. In addition, ASA proposes to organize and operate Adviser Sub in accordance with the following representations (“Proposed Representations”), which are designed to ensure that ASA’s ownership and operation of Adviser Sub involve no conflicts of interest that would disadvantage ASA’s shareholders or Adviser Sub’s Clients:

Prior to ASA’s entry into the advisory business, ASA’s Board, in making a final determination with respect to whether ASA should enter into the advisory business through Adviser Sub, will base its decision on whether doing so is in the best interests of ASA and its shareholders, and any determination to enter into the advisory business through Adviser Sub will be made by a vote of at least a majority of ASA’s directors who are not “interested persons” as defined in the Company Act. In making its decision, ASA’s Board will discuss and consider the risks and liabilities of entering into the advisory business that are relevant to ASA in the context of the proposed business plan of Adviser Sub.

ASA will, consistent with its normal shareholder communications practices, which include the preparation and mailing of annual and semi-annual reports and proxy statements, advise its shareholders of the creation of Adviser Sub, the implementation through Adviser Sub of outside advisory services and an assessment of whatever risks, if any, are associated with the creation of Adviser Sub and its provision of advisory services.

ASA expects to own beneficially and of record 100 percent of the outstanding voting securities of Adviser Sub and, unless ASA disposes of all of its holdings of Adviser Sub’s outstanding voting securities, will own beneficially and of record at least 95% of the outstanding voting securities of Adviser Sub.

ASA will continue to operate as an internally managed, closed-end management investment company and will not use the advisory services of Adviser Sub.

ASA will adopt and implement policies and procedures with respect to the purchases and sales of securities that it makes for its own account and the purchases and sales of securities that Adviser Sub makes for Adviser Sub’s Clients in order to ensure fair dealing5 and compliance with the Company Act and the Advisers Act (to the extent applicable). In particular, such policies and procedures will be reasonably designed to prevent violation of section 17 of the Company Act and the rules thereunder, as well as staff guidance thereunder.6 If Adviser Sub registers as an investment adviser with the Commission, Adviser Sub’s policies and procedures also will be reasonably designed to prevent violation of the Advisers Act and the rules thereunder.

To the extent that Adviser Sub is not registered as an investment adviser with the Commission, Adviser Sub will comply with rules 31a-1(e) and 31a-2(d) under the Company Act7 with respect to the maintenance and preservation of its books and records, and ASA will provide the Commission and staff with access to such books and records.

ASA’s Board will review at least annually the investment advisory business of Adviser Sub in order to determine whether or not such business should be continued and whether or not the benefits derived by ASA from Adviser Sub’s business warrant the continued ownership of Adviser Sub and, if appropriate, approve (by a vote of at least a majority of its directors who are not “interested persons” as defined in the Company Act) at least annually such continuation. In determining whether or not the investment advisory business of Adviser Sub should be continued and whether or not the benefits derived by ASA from Adviser Sub’s business warrant the continued ownership of Adviser Sub, the Board will take into consideration, among other things, the following:

the compensation of the officers of ASA and of Adviser Sub;

all investment decisions of ASA that relate to any Client of Adviser Sub; and

the allocation of expenses associated with the provision of advisory services between ASA and Adviser Sub.8

ASA’s establishment and operation of Adviser Sub will not cause ASA to violate any of the terms or conditions of its Section 7(d) Order, as amended, will be consistent with ASA’s organizational documents, and will not require any amendments to any provision in those documents that ASA’s Section 7(d) Order requires to be in ASA’s organizational documents, except as permitted under the Section 7(d) Order (as that order may have been amended or as it may be amended in the future).

LEGAL ANALYSIS

Section 12(d)(3) of the Company Act provides that it is unlawful for any registered investment company to purchase or otherwise acquire any security issued by any person who is a broker, dealer, underwriter, or investment adviser to an investment company or investment adviser registered under the Advisers Act. Sections 12(d)(3)(A) and (B) contain a carve-out from this prohibition provided that: (A) such person is a corporation wholly owned by the investment company, and (B) “such person is primarily engaged in the business of underwriting and distributing securities issued by other persons, selling securities to customers, or any one or more of such or related activities, and the gross income of such person normally is derived principally from such business or related activities.”

The Commission has stated that Congress appeared to have two purposes for its adoption of section 12(d)(3). First, Congress wished to limit, at least to some extent, the exposure of registered investment companies to the entrepreneurial risks peculiar to securities-related businesses.9 Second, it wanted to prevent potential conflicts of interest and reciprocal practices between investment companies and securities-related businesses.10

You assert that organizing a wholly owned adviser subsidiary would be beneficial to ASA’s shareholders, would not disadvantage Adviser Sub’s prospective Clients, and is consistent with the policies underlying the Company Act and section 12(d)(3). With respect to Congress’s concerns about entrepreneurial risks, you state that much of this concern stemmed from the fact that, in 1940, most securities-related businesses were organized as privately held partnerships. If such a business failed, the investment company as a general partner could have been held accountable for the partnership’s liabilities. You state that ASA’s shareholders will not be exposed to the risks of unlimited liability associated with ASA’s ownership of Adviser Sub, because establishing Adviser Sub as a wholly owned, limited liability company subsidiary would insulate ASA’s shareholders by injecting a layer of liability protection between ASA and Adviser Sub. Under these circumstances, you contend that establishing a wholly owned subsidiary to engage in advisory activities would provide greater protection to ASA’s shareholders from the entrepreneurial risks of the advisory business than would be the case if ASA engaged in such advisory activities directly.

With respect to Congress’s concerns about potential conflicts of interest and reciprocal practices, most of the specific concerns identified by Congress, the Commission, and/or the staff in this area relate to an investment company’s ownership of a brokerage or underwriting business, rather than ownership of an advisory business. In addition, you contend that in light of the Proposed Representations, in particular your representations involving initial and annual Board review and approval and the policies and procedures that ASA will adopt and implement, ASA will not be subject to the potential conflicts of interest or reciprocal practices against which section 12(d)(3) of the Company Act is intended to guard by virtue of its ownership of Adviser Sub.

Based on the facts and representations set forth in your letter, we would not recommend enforcement action to the Commission under section 12(d)(3) of the Company Act against ASA if ASA organizes and acquires the securities issued by Adviser Sub.11 This letter expresses our position on enforcement action only, and does not express any legal conclusion on the issues presented.12 Because our position is based on the facts and representations in your letter, you should note that any different facts and representations may require a different conclusion.13

Shannon Conaty
Senior Counsel

1 Your letter also requests that we provide this relief as an interpretive matter. We decline to provide the requested interpretation.

4 You represent that ASA could provide the same advisory services directly without the requested relief, but at far greater risk to shareholders. Advisory activities also could be expanded by setting up a stand-alone investment adviser entity without the requested relief, but without offering ASA’s shareholders the ability to share in the income earned from the new advisory business.

5 In order to ensure fair dealing, the policies and procedures will, for example, address unfair practices such as Adviser Sub trading in advance of ASA in order to take advantage of changes in the market price of a security that will be caused by ASA’s trade.

6 For example, order aggregation and investment allocation policies and procedures generally will conform to Commission staff guidance in SMC Capital, Inc., SEC No-Action Letter (pub. avail. Sept. 5, 1995) and Massachusetts Mutual Life Insurance Co., SEC No-Action Letter (pub. avail. June 7, 2000), unless such guidance is amended. In addition, ASA will not purchase interests in Adviser Sub’s Clients and will not purchase securities from or sell securities to Adviser Sub’s Clients unless such purchases and sales are permitted under section 17 of the Company Act or the rules or other staff guidance thereunder.

7 Rule 31a-1(e) under the Company Act provides that “[e]very investment adviser which is a majority-owned subsidiary of a registered investment company shall maintain in the form prescribed therein such accounts, books and other documents as are required to be maintained by registered investment advisers by rule adopted under Section 204 of the [Advisers Act].” Rule 31a-2(d) under the Company Act provides that “[e]very investment adviser which is a majority-owned subsidiary of a registered investment company shall preserve for the periods prescribed therein such accounts, books and other documents as are required to be preserved by investment advisers by rule adopted under Section 204 of the [Advisers Act].”

8 Such expenses may include: administration and operating expenses; investment research expenses; sales and marketing expenses; office space and general expenses; and direct expenses, including legal and audit fees, directors’ fees, and taxes.

11 This relief is consistent with previously issued Commission orders. See, e.g., General American Investors Company, Inc., Investment Company Act Release Nos. 11345 (Sept. 10, 1980) (notice) and 11396 (Oct. 10, 1980) (order) (permitting registered investment company to organize a wholly owned adviser subsidiary). This relief does not result in Adviser Sub being deemed to be “a company of the character described in section 12(d)(3)(A) and (B)” for purposes of section 17(a) or section 17(d) of the Company Act.

12 This letter confirms the position taken regarding ASA under section 12(d)(3) of the Company Act that the staff of the Division provided orally on July 16, 2010 to Robert H. Rosenblum, Esq. and Susan I. Gault-Brown, Esq., of K&L Gates LLP, counsel to ASA.

13 The Division of Investment Management generally permits third parties to rely on no-action or interpretive letters to the extent that the third party’s facts and circumstances are substantially similar to those described in the underlying request for a no-action or interpretive letter. See Informal Guidance Program for Small Entities, Investment Company Act Release No. 22587 (Mar. 27, 1997), n.20. In light of the very fact specific nature of ASA’s request, however, the position expressed in this letter applies only to the entity seeking relief, and no other entity may rely on this position. We also note that this letter expresses no view as to whether this relief under section 12(d)(3) of the Company Act is available to an internally managed, closed-end management investment company that has elected to be regulated as a business development company under the Company Act.